LINCOLN — The State Legislature’s tax committee outlined a property tax reduction proposal Wednesday night that would deliver about $466 million in relief in the first year by substantially boosting state spending on K-12 schools.
The package is in defiance of Gov. Pete Ricketts’ call for no new taxes.
In an effort to garner the support of urban senators, the bill would also allow the Omaha school district an exception so it could increase its property tax levy to raise about $12 million a year to help close a $771 million gap in its teacher pension program.
While backers of the proposal said it would provide tax relief for all Nebraska taxpayers, at least two rural members of the Legislature’s Revenue Committee questioned whether it did enough for farmers and ranchers, who have been hit hard by property tax increases in recent years.
State Sen. Tom Briese of Albion, a farmer who represents a rural central Nebraska district, said the plan needs an additional $300 million a year if it is to provide meaningful help to rural constituents.
“We’re presented with a generational opportunity to deliver on Nebraskans’ demand for property tax relief. We’re not going to take advantage of this if we sell ourselves short,” Briese said. Said Sen. Curt Friesen of Henderson, “This doesn’t do anything to fix the ($1 billion) shift on ag producers.”
But Sens. Lou Ann Linehan of Elkhorn and Mike Groene of North Platte, the main authors of the proposal outlined Wednesday night, disputed that.
“Everybody wins a little, but nobody is 100% happy,” Linehan said. “That is how we get big things done.”
Groene said that every school district in the state would see increases in state aid and that all landowners would see a drop in their property valuation. A spending cap based on the consumer price index combined with new construction would, he said, ensure that the property tax reductions in the bill would be for the long term, unlike past efforts to cut property taxes.
“Everybody wins,” said the senator, who leads the Legislature’s Education Committee.
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Their proposal, Legislative Bill 289, is tentatively slated for a public hearing on April 18 at 1 p.m. But the initial disagreement within the Revenue Committee doesn’t bode well for providing a comprehensive solution to an age-old gripe in the Cornhusker State: Property taxes are too high.
If all eight senators on the committee backed such a plan, it would send a strong signal of support to the 41 other state senators. If not? That sends a different message. Both Briese and Friesen said they could not support the bill at this point but are open to amendments.
Linehan urged her colleagues — some of whom have worked on property tax reform for years — to craft a bill that will gain 33 votes in the Legislature to withstand a likely veto by Ricketts, who has lampooned the idea of raising some taxes to lower other taxes.
“That doesn’t make sense,” Ricketts said on Wednesday, describing the Legislature’s proposals as a “scheme” in a luncheon speech to the Lincoln Chamber of Commerce.
The main features of LB 289, as presented Wednesday night, would:
» Increase state sales taxes by ½ cent, raising $171 million a year.
» Tax now-exempt pop and candy, raising another $30 million.
» Use most of the state property tax credit, which is budgeted at $224 million this next year.
» Earmark the estimated $51 million in new revenue from out-of-state Internet retailers for tax relief.
» Tax plumbing and moving services, about $13 million.
» Increase cigarette taxes by 36 cents a pack, raising about $29 million
» Reduce the valuation of ag land for property tax purposes to 65% of its value, and residential and commercial property to 90%. Currently, they are valued at 75% and 100%, respectively.
The tax relief would be funneled through the state’s program of state aid to schools through a complicated set of changes that would provide “foundation aid” to all school districts, particularly those mostly rural districts that get no so-called equalization aid from the state now. All school districts in the state, Groene said, would get an increase in state aid, with some of the smallest districts getting the most percentagewise.
The Omaha school district would get about $21 million more in the first year, just under a 10% hike, Groene calculated, with Millard getting $15 million more and Bellevue, an additional $2.7 million. By contrast, state aid to the rural Syracuse-Dunbar-Avoca Public Schools would increase 20-fold, to $2.4 million a year, and one of the tiniest school districts in the state, Loup County in the Sand Hills, would get a 50-fold state aid bump, to $361,000 a year.
Overall, Linehan said the increase in state aid to K-12 schools would put Nebraska more in line with the national average. Now, Nebraska ranks 46th in such state aid.
Ricketts didn’t get a lot of love for his property tax relief proposals from the Revenue Committee on Wednesday.
The committee fell one vote short of advancing his proposed constitutional amendment to limit property tax revenue increases to 3% a year. The committee did advance the governor’s proposal to increase the property tax credit program by $51 million, but because LB 303 isn’t prioritized, it’s unclear if it would be debated this year.